Fiscal
Accountability Audit of the Department of Education: Analysis of Selected
School Expenditures

Report
No. 00-14

Summary

This audit is our sixth
fiscal accountability audit of the Department of Education. This time we
demonstrated the kinds of information that can be generated by a tool like In$ite _ The
Financial Analysis Model for Education. Such information could assist
in making decision about the public school system. We applied In$ite
to the educational expenditures for FY1998-99 to determine per pupil
spending, school-by-school spending, and spending by such functions as
instruction and instructional support. We also assessed the department's
expenditure reports that are required by Section 302A-1004, HRS.

In$ite
is a computer software program designed to report educational expenditures
by location, function, and program. Inputting data obtained from the
department into In$ite, we generated a number of reports and
analyzed the potential for these reports to provide essential information to
facilitate decision making about the public school system. We found that In$ite
reports can provide useful information for:

Trend
analyses: Identification of spending patterns may show changes in
priorities over time. For example, over a four-year period, special
education per pupil costs increased by 28.8 percent while general
education costs increased by slightly more than a total of 5 percent.

Deviation
analyses: Identification and determination of why spending may vary from
specified norms, averages, or standards. For example, schools that have
significant variation from average school expenditures can be identified
to permit more in-depth analyses of causes for those departures from the
norm.

Comparison
analyses: Spending patterns can be compared to determine the reason for
cost variations among schools. In our sample, we found that expenditure
differences between two similar schools could be attributed to the
differences in the number of special education students enrolled in one
of the schools.

Cost/outcome
analyses: Reviewing costs compared to educational outcomes can be
helpful to assess program effectiveness. In our example, we found that
in FY1998-99 a school complex in compliance with the requirements of the
Felix consent decree spent as much as $1,550 per pupil less that
the statewide average while another complex that was not in compliance
spent $770 more per pupil than the statewide average.

We determined that the State spent $6,998 per pupil in FY1998-99. These
costs included moneys spent not only by the Department of Education but
other departments as well. We calculated, for each public school, the per
pupil costs for face-to-face teaching and other functions. These
school-by-school reports are contained in Appendixes C and D.

Recommendations
and
Response

We also examined the extent
to which the Department of Education met the fiscal accountability reporting
requirements specified in Section 302A-1004, HRS. While the department met
the requirements, we found that the department's reports were not as useful
and detailed as those produced by In$ite. The department's reports
only allowed for limited comparative analysis. Moreover, the department's
procedure for providing expenditure information needs improvement.

Finally, we found that
provisions of Section 302A-1004, HRS, do not meet the reporting requirements
intended in Act 199, Session Laws of Hawaii 1999. As a result, meaningful
comparison of expenditures by schools, programs and functions is not
possible.

We recommended that the
Board of Education require the Department of Education to provide reports of
greater detail similar to those produced by In$ite _ The Financial
Analysis Model for Education. We also recommended that the
Legislature expand the reporting requirements under Section 302A-1004(b),
HRS, to include meaningful comparisons of expenditures. The reporting
requirements should include, at a minimum, program expenditure and per pupil
costs by location, function, sub-function, and program.

The department responded
that it appreciates our findings on its reports and compliance with Section
302A-1004, HRS. This, however, was simply our observation not our findings.
We reiterate that our finding is that the department's expenditure reports
were not as useful and detailed as those available in In$ite.

The department also
responded that it agrees with our perspective on analyzing fiscal data and
will provide reports of greater detail similar to those produced by In$ite
to the Legislature and the Board of Education. We emphasize here that this
is a major shift by the department in finally acknowledging that our
information is more useful.

While acknowledging that the
analysis of selected expenditures might stimulate useful dialogue on
educational policy, programs, and practices, the department was concerned
that overly simplistic answers may result. However, our analyses are
intended to demonstrate how programs such as In$ite can provide
the information needed to conduct more detailed examinations.

Finally, the department
contends that our office is advocating the use of In$ite and
implied that the program is outdated. In$ite, similar to other
types of software programs, has been upgraded since its 1995 introduction.
We also reiterate and emphasize that while we found that the In$ite
program can provide very useful information for decisionmakers, we recommend
that a program similar to In$ite be used by the department.